2017 (2) TMI 521 - HC - VAT and Sales Tax

NEBULA Jewellery Watch Classified as Jewelry under Value Added Tax Act

STATE OF GUJARAT Versus M/s TITAN INDUSTRIES LIMITED

The court upheld the tribunal's decision that the NEBULA Jewellery Watch falls under Entry 13(ii) of Schedule II of the Value Added Tax Act. It concluded ... Classification of goods - NEBULA Jewellery Watch - whether fall under Entry 13(ii) of Schedule-II to the Value Added Tax Act or under Entry 87 of Second Schedule to the Act? - Held that: - As per meaning of Jewel /Jewellery in Law Lexicon Dictionary means Articles manufactured from those for the purpose of personal adornment are known as articles of jewellery. Even hair pin, hat pin, buckles and other similar ornaments adapted for personal use or otherwise, and composed of base metal or imitation of precious metals and otherwise, some being set with imitation precious stones, are dutiable as jewellery. Even the dress having diamond on it predominantly can be in a given case said to be a jewellery. Mainly because the NEBULA Watch carries the mechanism of watch it will not loose the characteristic of jewellery. No error has been committed by the learned tribunal in holding NEBULA Watch as NEBULA Jewellery Watch falling under Entry 13(ii) of Schedule II of the Act - appeal dismissed - decided against Revenue. Issues Involved:1. Whether the NEBULA Jewellery Watch falls under Entry 13(ii) of Schedule II of the Value Added Tax Act.Issue-Wise Detailed Analysis:Issue 1: Classification of NEBULA Jewellery Watch under the Value Added Tax ActFacts of the Case:The Joint Commissioner of Commercial Tax determined that the NEBULA Jewellery Watch falls under Entry 87 of the Second Schedule to the Act, making the assessee liable to pay a tax rate of 12.5% and an additional tax of 2.5% from 01/04/2008 onwards. The assessee appealed this determination, arguing that the NEBULA Jewellery Watch should be classified under Entry 13(ii) of Schedule II of the Act.Arguments by the Assessee:The assessee contended that the NEBULA Jewellery Watch is predominantly a piece of jewellery made of gold, silver, diamonds, or precious stones. They argued that the value of these materials constitutes 90% to 95% of the watch's value, making it more a piece of jewellery than a watch. The assessee further argued that these watches are marketed in jewellery shops and crafted by skilled artisans, thus qualifying as jewellery under Entry 13(ii) of Schedule II of the Act.Arguments by the State:The State argued that the NEBULA Jewellery Watch is essentially a watch with a mechanism, and since there is no specific entry for watches, it should fall under the residuary Entry 87 of the Second Schedule of the Act. The State emphasized that the primary function of the item is to serve as a watch, and thus it should be taxed accordingly.Tribunal's Judgment:The tribunal held that the NEBULA Jewellery Watch falls under Entry 13(ii) of Schedule II of the Act. It reasoned that the watch is predominantly made of precious metals and stones, and its value is derived mainly from these materials. The tribunal also noted that these watches are sold in jewellery shops and crafted with significant manual labor by skilled artisans, further supporting their classification as jewellery.Court's Analysis:The court examined Entry 13(ii) of Schedule II, which includes 'Articles or Jewellery made of gold or silver or both or of other precious metals (studded or not studded with precious stones or pearls whether real, artificial or cultured).' The court noted that the NEBULA Watch is made of 18 Karat gold and precious stones, with the value of these materials constituting 90% to 95% of the watch's total value. The court also considered the craftsmanship involved in making these watches, which are sold predominantly in jewellery shops.Legal Interpretation:The court referred to the Law Lexicon Dictionary's definition of 'Jewellery' and noted that the term should be given its widest possible meaning. It emphasized that the NEBULA Watch, despite having a watch mechanism, does not lose its characteristic as jewellery due to the predominant value and materials used.Conclusion:The court concluded that the NEBULA Jewellery Watch falls under Entry 13(ii) of Schedule II of the Act. It agreed with the tribunal's view that the watch is more a piece of jewellery than a simple watch. The appeal by the revenue was dismissed, and the question of law was answered in favor of the assessee.Final Judgment:The appeal was dismissed, and the tribunal's decision to classify the NEBULA Jewellery Watch under Entry 13(ii) of Schedule II of the Act was upheld. The court found no reason to interfere with the tribunal's judgment. The civil application associated with the tax appeal was also disposed of accordingly.